Dropshipping: How It Works

January 17, 2010 by

Dropshipping is a form of commerce which enables a retailer to sell products without actually having to keep the goods in stock or arrange the delivery of the goods to their customers. The retailer takes orders from their customers, but they do not supply the goods themselves. In fact, the goods never have to pass through the retailer’s hands. Instead, the goods will be delivered to the customer by manufacturer or wholesaler.

The customer pays the retailer, who pays the supplier. As long as the customer is paying more than the supplier is being paid, the retailer will make a profit. Dropshippers may charge an additional fee to the retailer, on top of the costs of the item and its shipping, so it is important for the retailer to price items carefully in order to ensure they will be making a fair profit.

Some retailers may keep a small number of items in stock for display purposes, if they have a physical store. Others may require a sample item which can be photographed and tested out before it is sold. Taking a close look at the item allows the retailer to make sure that they are selling a high quality product, and it can also make it easier to promote and sell the product since it makes it possible to give a first hand description of the item.

Dropshipping is very useful for small and online businesses since it removes the necessity for storage space. Holding large amounts of stock can be very expensive since storage space is not cheap. Using a dropshipper enables a small business to be run from home, without the need to rent premises or storage facilities, or to fill the house with stock.

As well as taking over the responsibility of storing the goods, the dropshipper also relieves the retailer from the tasks of inventory management and the packaging and delivery of goods. This significantly reduces the retailer’s workload, but it does also mean that they have to rely on the dropshipper to provide high quality products to the customers and to ensure that they are delivered safely and in a reasonable time.

The retailer is responsible for all of the aspects of the business that involve dealing directly with the customers. It will be up to the retailer to find customers, make a sail and handle any questions or complaints. Since the retailer does not have to manage the storage and shipping of goods, they can concentrate on delivering high quality customer service.

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